Month: June 2017

A debt consolidation loan allows someone to put loans and credit card debt under one roof and benefit from lower monthly payments. It is also possible to get a secured loan when bad credit exists. A bad credit loan means that finance is obtainable when a debtor has defaulted on a previous agreement.

Lower Monthly Payments

The payments are generally spread over more years which results in lower monthly payments. This can be of great assistance if financial problems exist and monthly outgoings need to be reduced.

Although lower monthly payments are of considerable benefit, more interest is paid over the loan duration. A £25,000 loan over 5 years at 17.9% would result in the payment of £13,008 interest. However, the same loan at just 7% over 25 years results in paying a colossal £28,008 interest.

Lower Interest or APR

The added security means that the borrower will benefit from a lower interest rate making monthly payments more affordable. If adverse credit exists, a debtor would have to pay a very high rate of APR if offered an unsecured loan.

Secured loans usually have a variable rate of interest. This means that the rates will vary at the lender’s discretion, which can throw out calculations.

Rejected For an Unsecured Loan

A credit rating may be so poor that it proves impossible to get an unsecured loan. This will be the case if someone has a CCJ registered against their name or have missed payments in the past. These customers are deemed a high risk so the only way to borrow money is through a debt consolidation secured loan.

Family Home is at Risk

Turning unsecured debt into secured debt isn’t usually a good option due to the higher risk. If considering consolidating a large amount of unsecured debt, one should consider an Individual Voluntary Arrangement first.

Early Redemption Penalty On a Secured Loan

Early payments towards the loan have a minimal affect on reducing the amount borrowed. Sometimes a borrower wishes to pay off some or all of the loan early and faces an early redemption penalty. This can amount to thousands of pounds.

There are a number of reasons why a secured loan may be the right choice, but one should always think carefully before securing debt on your home. If going ahead with debt consolidation, it is imperative that financial advice is sought before proceeding.

A country’s continual trade deficits eventually crystalize into national debt.

The so-called most developed economies of the G7 provide cases in point.

Net Debt by G7 Country

The following list shows the net debt levels for G7 countries, sorted from lowest to highest. With a population of 303.8 million, America leads the G7 with the highest amount of debt.

United States … US$7.387 trillion in net debt

Japan … $5.699 trillion

Italy … $2.131 trillion

Germany … $1.85 trillion

France … $1.503 trillion

United Kingdom … $793.3 billion

Canada … $266.2 billion.

Population of Each G7 Nation

The population statistics below are estimates from the CIA World Factbook.

United States … 303.8 million people

Japan … 127.3 million

Italy … 58.1 million

Germany … 82.4 million

France … 64.1 million

United Kingdom … 60.9 million

Canada … 33.2 million.

Net Debt Per Capita by G7 Country

Based on the above population numbers, the following list reveals that Japan and Italy lead other G7 nations in net debt per capita.

Japan … US$44,722 in net debt per person

Italy … $36,645

United States … $24,315

France … $23,457

Germany … $22,454

United Kingdom … $13,018

Canada … $8,015.

Global Trade Surpluses Only Part of Answer

Some economists might recommend a country to aggressively grow its exports as a tonic to cure deficit and debt issues.

While a positive balance of international trade will benefit any country, debt levels are so high that G7 countries are forced to borrow money to cover interest payments on their loans. Even robust export growth would be inadequate to cover these huge debts.

Countries that Could Loan to G7 Debtor Nations

According to the International Monetary Fund, only 30 countries are today net creditors. The rest of the world is drowning in debt. The 30 nations that could lend money to G7 countries including the U.S. are presented in alphabetical order below.

The problem is that eventually the currencies of debtor nations will devalue if debt levels continue to grow. That means that countries like China that loan money to the United States will be repaid in U.S. dollars that will plummet in value as central banks pump more cash into the system and inflation erodes the value of U.S. currency.

So freshly inaugurated president Barack Obama is quite right in fearing the day that lending nations like China back away from loaning money to the U.S.

Like other developing countries with healthy balance sheets, the Chinese are reluctant to agree to committing vast sums in financial agreements that, in essence, offload G7 debt.

Government spending on infrastructure projects is a step in the right direction. This will create jobs that will stimulate consumer spending, the largest component of a nation’s Gross Domestic Product (GDP).

Next, G7 nations need to focus on commodities and products in which they have competitive advantages in global trade. Only then will creditor countries consider extending more credit to G7 countries burdened with debt.